Holiday surprise

Ferrous

Holiday surprise

Scrap processors and shippers who benefit from loftier prices received an early holiday present when the early December 2017 scrap buying period led to per-ton price increases in the $20-to-$30 range.

One recycler in the Great Lakes region says of negotiations between processors and mill buyers in early December, “Initial talks [were] in the plus $10-to-$20 range.” By the time American Metal Market (AMM) had calculated its Midwest indices Dec. 11, however, “The market ended up being up $20 to $30 per ton—up $20 on primes and up $30 on obsoletes.”

AMM Midwest Scrap Index, No. 1 Busheling (blue circles): All prices are effective the 10th of the month or the following Monday if the 10th falls on the weekend; RMDAS Ferrous Scrap Price Index (black squares): Per gross ton for No. 2 shredded scrap, defined as 0.17 percent or greater copper content, effective the 20th of each respective buy month.

With the same recycler concluding that “the market shaped up nicely for December,” 2017 came to a close with only three months out of 12 where ferrous scrap prices lost more than $5 per ton on average. (Those months being February and April, which entailed relatively modest drops, and October, when prices plunged $30 to $40.)

On the supply side, scrap processors had more good things than bad to say about the early winter and the situation heading into the new calendar year.

“Things always slow down this time of year, but we are fairly busy,” a processor in the Upper Midwest says in mid-December. “The price bump helps,” he adds, regarding the ferrous scrap price increase in early December.

A scrap processor in the prairie states comments in mid-December: “Flow is good, and we have had a really busy second half of the year.” He expresses concern, however, about the falling price of copper, which could affect flows of all material going forward.

“With this devaluation in the [nonferrous] markets recently, we’ll see; but, we still seem to be buying some material.”

Futures-traded copper on the COMEX exchange fell to as low as $2.94 per pound for March delivery in early December, reportedly based on an abundance of mined copper and concerns about China’s economy.

Overall on the ferrous side, recyclers express optimism as they head toward the new year. Pleased with how December went, the Great Lakes region processor adds, “January is looking good as well. The early forecast, I would say, is up another $10 to $20 per ton.”

Demand seems healthy, though seasonal factors could come into play, the recycler in the Upper Midwest says. “Our foundries around here seem to be busier than they were a year ago, for sure, but not crazy busy,” he comments. “Most are shutting down the whole week of Christmas.”

Nonetheless, regarding January, he adds, “Domestic markets seem to be good, and hopefully it carries over into the new year.”

Export demand also remained healthy in late 2017, with U.S. Census Bureau data showing that even when Turkish mills reduce their purchases, emerging market buyers from Southeast Asia and the Indian subcontinent step in. (For more on these emerging markets, see the feature article “Expecting big things” in the Scrap Metals Supplement of this issue.)

The 2017 ferrous price scorecard totaled six months where scrap gained value, just three where it lost value and another three with an essentially flat market (major grades gaining or losing $5 per ton or less in price).

The year featured some regional pricing disparities, however, as well as rising and falling gaps in the value of obsolete grades versus prompt or prime grades. Heading into the new year, the Great Lakes processor predicts, “We may see the gap close on primes and obsoletes.”

The November buying period featured one of the wide gaps in grade value in 2017, with prime grades fetching some $60 per ton more than shredded scrap and nearly $80 per ton more than No. 1 heavy melting steel (HMS) that month, according to AMM’s Midwest indices.

Figures collected and averaged by the Raw Material Data Aggregation Service (RMDAS) of Pittsburgh-based MSA Inc. show that mills in the RMDAS North Midwest region paid as much as $17 per ton less for scrap compared with their counterparts in other regions in November 2017.

Scrap prices in the North Midwest region typically lag those in the RMDAS North Central/East region but usually are comparable with those in the RMDAS South region. In May 2017, mills in the two regions paid within $4 per ton more on average for all three grades RMDAS tracks: prompt scrap, shredded scrap and No. 1 HMS.

“Things always slow down this time of year, but we are fairly busy. The price bump helps.” – an Upper Midwest region recycler

In November, buyers in the South were able to get No. 1 HMS for just $3 per ton more on average compared with their counterparts in the North Midwest. However, southern mills paid $9 more per ton for prompt scrap and $17 per ton more for shredded scrap.

Such regional disparities in the steel rebar sector are cited among the reasons why Charlotte, North Carolina-based Nucor Corp. is investing in smaller, regional scrap-fed micromills to produce rebar. (See “Nucor to build micromill in Missouri” for more information.)

The American Metal Market (AMM) Midwest Ferrous Scrap Index is calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The AMM Scrap Index includes material that will be delivered within 30 days to the mill. Spot business included after the 10th of the month will not be included. The AMM Ferrous Scrap Export Indices are calculated based on transaction data received that are then tonnage-weighted and normalized to produce a final index value. The detailed methodology is available at www.amm.com/pricing/methodology. *FOB New York, in metric tons; **FOB Los Angeles, in metric tons.